The newly installed CEO of Norwegian LCC Flyr plans to strengthen domestic distribution, cut underperforming routes and wet-lease out the airline’s spare Boeing 737s, after raising NOK250 million ($25.1 million) to weather the winter season.
On Nov. 25, Oslo-based Flyr announced that Brede Huser had taken over as CEO, replacing founding CEO Tonje Wikstrøm Frislid. Huser has been CFO of the airline since before its June 2021 launch. Before that, he was with Norwegian for 19 years.
“Our goal right now is to deliver on our new updated business plan,” Huser told Aviation Daily in an interview Dec. 6.
In October, Oslo-based Flyr said it needed to take “forceful action” to reduce cash burn, slashing its cost base by 50%. The new business plan involves cutting back domestic routes to a minimum in favor of more profitable European leisure destinations. Flyr has also furloughed about 50% of its work force and halved its fleet from 12 to five or six Boeing 737s for the winter season.
“That’s why we went out into a difficult capital markets to raise capital,” Huser said. “We were approached by investors, who came with a suggestion regarding the financing plan, which we supported and we went ahead with.”
This plan involved a recently completed NOK250 million capital raise, attracting over 100 investors. Flyr is offering these investors a further NOK250 in subscription rights, which can be exercised in January, February or March 2023. To avoid dilution of existing shareholders, Flyr is also planning a NOK100 million “repair issue,” which will likely be carried out in early January. These shareholders will also be offered NOK100 million in subscription rights.
“In total, we can raise up to NOK700 million,” Huser said. “This NOK700 million will last us, basically, indefinitely. If we raise all the NOK700 million—which we do not need to—we will be stronger than ever from a financial point of view.”
Flyr is a publicly listed company, and its ownership is spread across over 24,000 shareholders.
Over the winter months, Flyr is actively seeking wet-lease and charter contracts for its six grounded 737s, which will be reintroduced into the operational fleet by April 2023.
“When we get to April, we’ll start scaling up again, and we will have all 12 aircraft in the air by the spring,” Huser said. “We haven’t returned any aircraft and we have full support from the lessors. We have raised capital and we are paying our bills.”
Flyr’s fleet has six 737 MAXs and six 737-800s. “We took the NGs on six-year leases, and the MAXs on nine-year leases, so we took shorter leases on the NGs to go all-MAX at some point in time,” Huser said.
The company took options on a further four aircraft and Huser said these have been firmed for delivery in 2024, although this timeline could be affected by manufacturing delays.
But what went wrong for Flyr? Huser said the Omicron coronavirus variant cost Flyr NOK500 million, but the fledgling airline did not benefit from any state-backed loans, and record-high fuel costs began to bite.
“In July, we had the same ex-fuel unit cost as Norwegian did. We had 10 aircraft, they had 70 aircraft, so we are very cost efficient on a low scale,” he said. “We are exactly where we want to be from a cost perspective.”
Then, in mid-August after the Norwegian peak holiday season ended, Flyr began to redeploy its fleet from European leisure routes to domestic operations, but competition was fierce and Flyr was not capturing enough traffic.
“The weakness for Flyr, since the start, has been domestic traffic,” Huser said. “We didn’t quite have enough travel-agency distribution and corporate agreements to absorb that increase in domestic.”
Flyr has been using IATA’s new distribution capability (NDC) since it launched and it had planned to start travel-agency distribution just before the summer, but this ended up being delayed until November. “Part of the explanation is the choice of NDC technology,” Huser said, because there was a lack of IT capacity to upgrade travel agency systems to NDC. Since November, Flyr has been distributed by Berg-Hansen, which has 40% market share of business traffic in Norway. “That’s the biggest, and we’re working on more travel agencies as well,” he said.
Instead of the planned domestic ramp-up, this winter Flyr will fly to major European cities and leisure destinations, like Barcelona, Rome and Paris. “We will focus on the routes where we have achieved a strong foothold, high loads and acceptable yields,” Huser said. “Going forward, probably 85% of our seat production will be international traffic.”
Flyr’s remaining Norwegian domestic flights will be restricted to weekend Oslo-Trondheim and Oslo-Bergen flights, or opportunistic profitable flying, in the short- to medium-term. “Before we return, we need to see that the demand is there,” Huser said.
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